Rate held at 3.25%: the Bank of Israel's pause
After four cuts since January, the Bank of Israel has opted for a pause. On October 21, 2026, its monetary committee kept the key interest rate at 3.25%, according to coverage by the Times of Israel and Buy it in Israel. For all Jews in the diaspora considering buying in Israel, whether from the United States, Europe, Russia, Latin America, or South Africa, this decision signals something important: the local credit easing cycle may be coming to an end, even as Israelis are borrowing at a record pace.
Why the central bank hit pause
The key interest rate stood at 4.25% at the start of the year; it was lowered in January, May, July, and then on September 1, reaching 3.25%. According to the bank, the economy is expected to grow faster than previously forecast: the 2026 growth forecast has been raised to 5.6% (from 4% previously) and the 2027 forecast to 7.5% (from 5.5%), a revision that largely reflects overseas production by Israeli companies. Excluding this effect, expected growth is 3.4% in 2026 and 5.1% in 2027. The bank also cites a weaker shekel, which has depreciated 3.1% against the dollar since the previous decision, and a stabilization of geopolitical risk, with Israel's risk premium remaining close to pre-October 7, 2023 levels, while noting that uncertainty remains high. The global context also plays a role: according to Buy it in Israel, the US Federal Reserve and the European Central Bank each raised their rates by 0.25 points at their last meetings, Brent crude rose about 15% to around $110, and Israeli unemployment remains low at 3.3%. Against this backdrop, the central bank's caution is easily understood. Inflation, for its part, stood at 1.6% year-on-year in September, slightly below the midpoint of the 1% to 3% target range. The next meeting is scheduled for November 23.
Mortgage lending at a record level despite a slow market
The paradox of the Israeli market can be summed up in one figure: Israelis have never borrowed so much to buy property. According to Bank of Israel data cited by Globes, new mortgage loans reached 10.9 billion shekels in August 2026, or about $3.5 billion at the October 23 exchange rate of 3.112 NIS per USD. The monthly average for the first eight months of 2026 stands at around 10 billion shekels, compared to an average of 8.8 billion in 2025 and 7.8 billion in 2024. September borrowing reached approximately 10.3 billion shekels, or nearly $3.3 billion, according to Buy it in Israel. Borrowers are increasingly turning to prime rate-linked tranches, currently at 4.75%, 1.5 points above the key interest rate, while the share of 'balloon' loans, linked to deferred-payment schemes offered by developers, has fallen to its lowest level since late 2023.
Falling prices, stabilizing cost of credit
On the pricing side, the Central Bureau of Statistics (CBS) recorded a 0.6% decline in July-August 2026 and a 1.8% drop year-on-year. This contrasts sharply with rents: +5.3% year-on-year for new tenants and +2.4% for renewed leases, according to the Bank of Israel. Against this backdrop, the monetary pause sends a measured message: the cost of credit will not rise in the short term, but it is also unlikely to fall sharply. The bank's economists, who also believe that the effects of the cuts already decided have not yet fully materialized, are forecasting an average rate of 3% in the third quarter of 2027, while private forecasters and markets anticipate closer to 3.1%. In other words, there is little room left for further cuts.
The exchange rate matters as much as the interest rate
For a diaspora buyer, the shekel weighs as heavily as the loan. On October 23, 2026, the Bank of Israel's representative rate was 3.112 NIS per USD, 3.4844 NIS per euro, and 4.1624 NIS per British pound. At these rates, an apartment priced at 3,000,000 NIS represents approximately $964,000, €861,000, or £721,000. The shekel's 3.1% decline against the dollar since the last decision makes a purchase in shekels less expensive in dollar terms, assuming constant shekel prices, while local prices remain stable or slightly down. The effect works both ways: if the shekel were to strengthen again, that same apartment would cost more in foreign currency. No central bank can predict currencies; what matters is calculating your budget in your own currency, including conversion fees.
What to do amid a stabilizing cycle
Three simple principles. First, don't wait for a massive rate cut: the bank anticipates only one more quarter-point cut by the end of 2027, bringing the average rate to 3% in the third quarter of 2027. Second, compare multiple financing offers, as the gap between prime, fixed, and indexed tranches significantly affects the total cost of a loan. Finally, factor in the payment schedule for an off-plan purchase, which exposes buyers for years to both interest rate and currency fluctuations. The steps involved in a remote purchase, from financing to taxation, are covered in our ultimate guide to real estate in Israel.
A pause, not a pivot
The October 21 decision does not mark a change in direction, but a milestone: credit is cheaper than in January, prices are falling, and Israelis are borrowing en masse. For Jewish communities around the world, this is a moment for observation rather than a signal for urgency. The team atImmobilier.co.il helps you calculate your budget in your own currency and build a financing plan tailored to your situation.
